National Economic Council

Transcription

nNational Economic CouncilMAY 2011

IntroductionThis report focuses on the vital role that America’s entrepreneurs and small business ownersplay in strengthening the U.S. economy. The Obama Administration has put new initiatives andincreased incentives in place to support small businesses – including seventeen tax cuts,improved access to capital and expanded support for high growth businesses – as they continueto out‐compete, and out‐innovate the rest of the world.Over the past two and a half years, President Obama has enacted sweeping changes to support,reinvest, and revitalize America’s economy in the wake of a major recession. As a result, largeU.S. firms are now making powerful new investments, including building new facilities andbuying new equipment.With regards to job creation, however, we know that America’s small businesses pack thebiggest punch, creating two out of every three new jobs in the U.S. each year. These smallbusinesses are the cornerstone of our communities. They are the source of pride for workingfamilies. And, every day, we see America’s entrepreneurs continue to step out and take riskswith new ideas in order to help us win the future.This report details the many investments this Administration has made since January 2009 tosupport small businesses, investments that include: expanding access to capital, supportingstartups and high‐growth firms, training America’s workforce, reducing barriers toentrepreneurship, increasing small business exports, and much more.On that note, we would like to thank the following agencies for their contributions in preparingthis report: the U.S. Department of Agriculture, the U.S. Department of Commerce, the U.S.Department of Defense, the U.S. Department of Health and Human Services, the U.S.Department of Homeland Security, the U.S. Department of Labor, the U.S. Department of theTreasury, the U.S. Department of Veterans Affairs, the Export‐Import Bank of the United States,the General Services Administration, the National Aeronautics and Space Administration, theNational Science Foundation, and the U.S. Small Business Administration.More than ever, we are all committed to supporting entrepreneurs and small businesses asthey create jobs and strengthen America’s economy in the 21st century.Gene B. SperlingThe National Economic CouncilKaren G. MillsU.S. Small Business Administration

Table of ContentsExecutive Summary. 1I. Small Business Tax Breaks. 3Legislation Committed to Supporting Small Businesses . 3Simplifying Tax Credits . 3II. Improved Access to Capital. 6Enhanced Lending Practices. 6Support for Underserved and Disaster Afflicted Communities . 9Increased Capital for Rural Businesses . 12New and Strengthened Development Programs . 14Listening to Small Businesses and Building on Success . 16III. Augmented Federal Contracting Opportunities . 19Presidential Interagency Taskforce on Federal Contracting Opportunities for Small Businessand The Small Business Jobs Act of 2010. 19Federal Contracting Opportunities for Minorities . 20Increased Federal Contracting Dollars . 22More Efficient Government Contracting Procedures . 25Contracting Partnerships for Small Businesses . 26Meeting National Security Needs through Small Business . 27IV. Increased U.S. Exports through the National Export Initiative . 33The National Export Initiative Promotes Exports by Small Businesses . 33

Improving Advocacy and Trade Promotion . 33Helping Minority‐Owned Firms Export . 37Increasing Access to Export Financing . 38Joint Efforts . 40International Small Business Collaboration . 40Reduce Barriers to Trade . 41Robust Enforcement of Trade Rules . 42Macroeconomic Support for Expanded Exporting . 43V. Enhanced Development and Education Opportunities for Entrepreneurs. 44Development Programs for Entrepreneurs . 44Programs for Traditionally Disadvantaged Groups . 46Enhanced Regional Economic Competitiveness . 49Improving America’s Entrepreneurial Infrastructure . 51Educating Americans with 21st Century Skills and Create a World‐Class Workforce . 52Educating Entrepreneurs and Small Businesses about Security Concerns . 53VI. Heightened Innovation and High Growth Support. 56The Startup America Initiative to Support America’s Entrepreneurs . 56The Startup America Partnership . 58Tools for Small Businesses with High‐Growth Potential . 59The USDA Agricultural Research Service . 65Investments in Broadband Technology for Small Businesses . 68The Manufacturing Extension Partnership . 71

Entrepreneurship Programs for Veterans . 71Science and Technology Directorate . 72VII. Strengthened Small Business Protection. 75The Dodd‐Frank Wall Street Report and Consumer Protection Act . 75Credit Card Accountability, Responsibility, and Disclosure Act . 75The Affordable Care Act . 75Improving Regulations for Small Businesses . 76VIII. Conclusion. 78

Executive SummarySmall businesses are the engine of the American economy, having created 64 percent of newAmerican private sector jobs generated in the past 15 years—that’s 40 million net new jobsaccording to the Council of Economic Advisers. Recognizing this critical role that smallbusinesses play in the U.S. economy, President Obama is committed to ensuring that smallbusinesses continue to receive the tools and resources they need to address the challengesthey face. These initiatives offer support to small businesses so they are able to bring the powerof their ideas to the marketplace in ways that can catalyze and transform our economy,creating jobs through new innovations in products and services.Since taking office in January 2009, President Obama has made enormous strides in supportingU.S. small businesses. Going forward, the Administration continues to champion our nation’svital small business resources. The Administration continues to emphasize serving all U.S. smallbusinesses while placing additional focus on historically underserved communities including,minorities, women, veterans, and businesses in economically disadvantaged areas.Small businesses encompass a wide swath of America—from “mom and pop” Main Streetstores to young innovators dreaming of the next new Google. At the core of every smallbusiness is the entrepreneur. These entrepreneurs need the tools to make their dreams cometrue for they are the source of America’s competitive advantage—to inspire and empower anever greater diversity of communities and individuals to build great American companies.Over the past two and a half years, the President and agencies across the Executive Branchhave worked to implement policies and programs to help small businesses bridge the capitaland market gap and encouraged public‐private partnerships to support workforce re‐trainingand entrepreneurship by: Supporting more than 53 billion in SBA loan guarantees to more than 113,000 smallbusinesses; Awarding more than 221 billion in Federal contracts to small businesses (FY 2009through April 30, 2011); Providing counseling, through SBA resource partners and other agencies, to more than 2million entrepreneurs and small business owners; Awarding more than 4.5 billion in research funding through the Small BusinessInnovation and Research Program during FY 2009 and FY 2010; and Streamlining Federal programs to help small businesses such as the Department ofDefense’s recent announcement to reduce the time to pay its small business vendors1

from 30 days to 20 days—which will impact more than 60 billion of goods and servicesit purchases from small businesses.The Administration’s small business initiatives have been accomplished through the tirelessefforts of the Executive Agencies of the Executive Branch, as well as through an ambitiouslegislative agenda. The capstone of this continuing support was the Small Business Jobs Act of2010 signed in September 2010, which is the most significant piece of legislation to help smallbusinesses in over a decade.Over the past two and a half years, the Administration has accomplished much in support ofsmall businesses as set forth in this report, including:I.II.III.IV.V.VI.VII.Expanded Small Business Tax BreaksImproved Access to CapitalAugmented Federal Contracting OpportunitiesIncreased U.S. Exports through the National Export InitiativeEnhanced Entrepreneurial Development and Education OpportunitiesHeightened Innovation and High Growth supportStrengthened Small Business ProtectionThis is the first time an administration has prepared a comprehensive report that covers smallbusiness efforts across the Federal Government. This report was prepared with input from thefollowing agencies: the U.S. Department of Agriculture, the U.S. Department of Commerce, theU.S. Department of Defense, the U.S. Department of Health and Human Services, the U.S.Department of Homeland Security, the U.S. Department of Labor, the U.S. Department of theTreasury, the U.S. Department of Veterans Affairs, the Export‐Import Bank of the United States,the General Services Administration, the National Aeronautics and Space Administration, theNational Science Foundation, and the Small Business Administration.2

I. Small Business Tax BreaksLegislation Committed to Supporting Small Businesses. The Administration is committed toproviding small businesses key support through a series of tax breaks that combine increasedcapital, as well as providing key incentives for small business investment and growth. To date,the Administration has supported 17 direct tax breaks that support small business growth. Forfurther information on tax breaks for small businesses, please visit small‐businesses. From the American Recovery & Reinvestment Act (ARRA) Act, the Hiring Incentives toRestore Employment (HIRE) Acts, and the Affordable Care Act:1. A New Small Business Healthcare Tax Credit. Starting retroactively to January 1, 2010, anew small business health care tax credit is in effect that covers up to 35 percent ofhealthcare premiums, with the top rate increasing to 50 percent in 2014. The IRS hasnotified over 4 million small businessesAbout 4 million small businesses could becould be eligible for this tax credit, and smalleligible for new healthcare tax credits ifbusiness owners can now find informationthey provide health insurance. Thisincludes Niedlov’s Breadworks inon how to apply for a tax credit on theChattanooga, Tenn. Niedlov’s owners,Department of Health and Human Services’John and Angela Sweet have always(HSS) website; available here:wanted to provide health insurance tohttp://www.healthcare.gov/foryou/small/itheir employees. “It’s something that Index.html. Altogether, the Affordable Carefeel would make us a better employerand a more complete business,” JohnAct invests 40 billion over the next decadesaid.When Congress passed thein tax credits that enable small businesses toAffordable Care Act, John took a look atinvest, compete, and hire more workers.his options and studied the new tax2. A New Tax Credit for Hiring UnemployedWorkers. This credit could provide up to 10.4 billion in tax relief for businesses thathired recently unemployed workers byproviding a tax credit equal to 1,000 foreach eligible employee through 2010 whowas retained for more than one year.credits. He decided that now was thetime to provide health insurance to hisfull‐time employees. “It won’t be costfree, but it won’t cost too much,” Johnsaid, adding that even if it’s only for ahandful of people, it’s important that, asa small business owner, he’s able toprovide benefits for his employees.3. Bonus Depreciation Tax Incentives to Support New Investment. In 2008 and 2009,small businesses were able to recover the costs of capital expenditures faster than theordinary schedule, by depreciating 50 percent of the cost in the first year.4. 75 percent Exclusion of Small Business Capital Gains. Under the Recovery Act, 75percent of capital gains from certain small business stock (up from 50 percent) can be3

excluded from taxes if the stock is acquired after February 17, 2009 and before January2011, and held for more than five years.5. Expansion of Limits on Small Business Expensing. The Section 179 deduction enablessmall businesses to deduct up to 250,000 of the cost of machinery, equipment,vehicles, furniture and other qualifying property placed in service during 2009. The limitwould have been 133,000 without the extension in the ARRA.6. Five‐Year Carryback of Net Operating Losses. Small businesses with deductionsexceeding their income in 2008 were able to use a new net operating loss tax provisionto get a refund of taxes paid in prior years. This provision enables small businesses witha net operating loss (NOL) in 2008 to elect to offset this loss against income earned in upto five prior years. Typically, an NOL can be carried back for only two years.7. Reduction of the Built‐In Gains Holding Period for Small Businesses from 10 to 7 toAllow Small Business Greater Flexibility in Their Investments.8. Temporary Small Business Estimated Tax Payment Relief to Allow SmallBusinesses to Keep Needed Cash on Hand. From the Small Business Jobs Act:9. Zero Taxes on Capital Gains from Key Small Business Investments. Under the RecoveryAct, 75 percent of capital gains from certain small business investments were excludedfrom taxes in 2009 and 2010. The Jobs Act temporarily eliminated these taxesaltogether in 2010, providing an immediate incentive for increased investments in smallbusinesses.10. The Highest Small Business Expensing Limit Ever– Up to 500,000. Building onprovisions in the Recovery Act and HIRE Act, the Small Business Jobs Act increased theamount of investments small businesses could immediately write off in 2010 and 2011to 500,000 for qualifying investments and raised the total phase out limit to 2 million,providing an immediate tax incentive for them to expand and create new jobs.11. An Extension of 50% Bonus Depreciation. The Jobs Act extended, as the Presidentproposed in his FY 2011 Budget, a 50 percent “bonus depreciation” provision thatencourages businesses to invest in plants and equipment by accelerating the rate atwhich they can deduct capital expenditures.12. A New Deduction for Healthcare Expenses for the Self‐Employed. Building on theAffordable Care Act, the jobs bill allows self‐employed entrepreneurs to deduct the costof health insurance in 2010 for themselves and their family members in calculating their4

self‐employment taxes, providing a significant tax cut this year for entrepreneurspurchasing health insurance for themselves and their families.13. Tax Relief and Simplification for Cell Phone Deductions. The Small Business Jobs Actchanged tax rules to simplify deductions for business cell phones—making it easier forsmall business owners to receive deductions that they are entitled to withoutburdensome documentation.14. An Increase in the Deduction for Entrepreneurs’ Start‐Up Expenses. The Small BusinessJobs Act temporarily increased the amount of start‐up expenditures entrepreneurs candeduct from their taxes from 5,000 to 10,000, offering an immediate incentive foraspiring entrepreneurs to invest in starting up a new small business.15. A Five‐Year Carryback of General Business Credits. Building on temporary Recovery Actmeasures, the Small Business Jobs Act allowed certain small businesses to “carry back”their general business credits to offset five years of taxes—providing them with aninstant tax break—while also allowing these credits to offset the Alternative MinimumTax, reducing taxes for these small businesses.16. Limitations on Penalties for Errors in Tax Reporting That Disproportionately AffectSmall Business. The bill changed, beginning in 2010, the penalty for failing to reportcertain tax transactions from a fixed dollar amount—which was criticized for imposing adisproportionately large penalty on small businesses in certain circumstances—to apercentage of the tax benefits from the transaction. And from the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act:17. 100 Percent Expensing. The agreement includes the President’s proposal—madeeffective September 8, 2010—to temporarily allow businesses to expense 100 percentof their investments in the last quarter of 2010 and in all of 2011, potentially generatingmore than 50 billion in additional investment in 2011, which will fuel job creation.Simplifying Tax Credits. The Treasury Department is working on a set of regulatory reforms tothe existing New Markets Tax Credit, which the Administration is proposing to expand from 3.5 billion for 2011 to 5 billion for 2012 in its FY 2012 Budget proposal. These reforms willmake it easier for community development entities to attract private sector funds forinvestment in startups and small businesses operating in lower‐income communities. Thereforms, which are expected to go into effect later this year, will relax the reinvestmentrequirements for community development entities investing in certain operating businesses.5

II. Improved Access to CapitalEnhanced Lending Practices. America’s preeminence in generating innovative new companiesdepends on open and well‐functioning credit and capital markets. During the financial crisis andrecession access to capital dried up, particularly for small firms. As our economy recovers, somesmall businesses have continued to struggle to access capital to maintain operations or grow.The Administration has been focused on addressing these shortfalls and barriers since takingoffice. Through new legislation and initiatives, the Obama Administration has achievedenhanced lending practices for small businesses. Now, agencies and private lenders can meetsmall businesses’ needs better than ever, with improved loan turnaround times, more points ofaccess, increased loan volumes, and increased loan sizes. Significantly Increased Small BusinessAdministration (SBA) Small Business LoanVolumes.Total Number of SBA Loans Made to Morethan 113,000 Small BusinessesFrom January 2009 to April 2011, SBA hassupported more than 55.6 billion in lending to– Recovery Act Loans. The Recovery Actmorethan 113,000 small businesses, includingimplemented reduced fees for SBA’s twomore than 42 billion in loans with reducedlargest loan programs, 7(a) and 504, andfees and higher guarantees made possiblealso raised the guarantees on SBA’s 7(a)through the American Recovery &loan program. These loan enhancements Reinvestment Act and the Small Business JobsAct.engineered a significant turnaround inSBA lending at a critical time. As ofSeptember 30, 2010 SBA approved 22.6 billion in Recovery Act loan guarantees, whichsupported 30.4 billion in lending to small businesses. From February 17, 2009 toSeptember 30, 2010, weekly SBA loan dollar volumes rose more than 90 percent in the7(a) and 504 programs, compared to the weeks preceding ARRA’s passage. Overall,more than 70,000 small businesses received SBA loans with Recovery Actenhancements.– Small Business Jobs Act. Following the passage of the Small Business Jobs Act of 2010 inSeptember, which extended 7(a) and 504 loan enhancements, weekly loan volumes roseand reached a high of approximately 2.2 billion. This represents the highest weeklylending level since the SBA began tracking weekly loan volumes. As of December 31,2010 SBA approved more than 10 billion in Jobs Act loan guarantees, which supportedmore than 12 billion in lending to small businesses. Since enactment of the Jobs Act,SBA 7(a) and 504 programs have assisted more than 19,000 small businesses in FY 2011.– Loans to Minorities, Veterans, and Women. From January 2009 to April 2011, SBA hassupported approximately 28,000 minority‐owned businesses with more than 10.33billion in lending support, approximately 10,000 veteran‐owned businesses with almost6

2.5 billion in lending support, and approximately 25,000 women‐owned businesseswith more than 5.76 billion in lending support. Increased Points of Access. Central to the turnaround in SBA lending has been increasedoutreach to, and participation by, lendingpartners across the United States. As a result,In 2002, Rob Hatch and his wife TaraSBA has helped increase the points throughfounded Anemometry Specialists inAlta, Iowa, which provides windwhich small businesses can access SBA loanresources assessment for wind farms.programs. In FY 2010, more than 3,000Many lenders had not yet realized thefinancial institutions made a 7(a) loan, a 27economicpotential of wind energy inpercent increase since FY 2008, includingIowa, so Rob and Tara financed thenearly 1,300 lenders that had not made ancompany on their credit cards. InSBA loan since FY 2007.2009 a 70,000 SBA loan madepossible by the Recovery Act helpedRob and Tara continue to expand thecompany. They expect the expansionto add an additional five jobs in 2011. Expanded SBA Loan Sizes. The Jobs Actfulfilled the President’s pledge to permanentlyincrease SBA loan limits, helping ensure thatsmall businesses that are in a position toexpand and create jobs have access to the capital they need. The Jobs Act increased themaximum 7(a) loan size from 2 million to 5 million, increased the maximum 504 loan sizefrom 2 million to 5 million for regular projects and from 4 million to 5.5 million formanufacturing projects, and increased the maximum Microloan size from 35,000 to 50,000. The Jobs Act also temporarily increased working capital loans from 350,000 to 1million. In the first three months, these expansions supported over 1,200 loans totalingover 2.6 billion in loans that previously wouldn’t have been awarded. Support for Small Business Commercial Real Estate. The President called for and signedinto law a key program that will help small business owners refinance their existing owner‐occupied commercial real estate loans through SBA‐guaranteed programs (the 504Refinance Program). This program will help small business owners who are current on theirmortgage payments but whose banks mightIn Cleveland, Ohio, Miceli Dairynot reset the terms of their loans and who thusProducts plans to break ground on aface balloon payments. This program is 16 million to 20 million expansioncurrently being implemented and will provideof its operation that will add 60up to 15 billion in lending support over twoworkers to its 138‐employee workyears. Allowing access to SBA guaranteedforce within five years.mortgage refinancing options will helpThose plans became a reality whenbusinesses avoid foreclosure, keep their doorsthe company was approved for aopen and save hundreds of thousands of jobs. 5.49 million 504 loan. The loan is Provide Small Businesses with Access toCredit. In his FY 2012 budget, the Presidentproposes 165 million to support more than 15 billion in additional 7(a) loan guarantees7one of the largest in the program'shistory, and was made possible bynew provisions in the Small BusinessJobs Act.

that will help small businesses operate and expand in the coming year. The President’sBudget also supports measures to strengthen financing programs for small business owner‐occupied commercial real estate and equipment through Certified DevelopmentCompanies; leverages early‐stage mezzanine investment financing through Small BusinessInvestment Companies; and provides Microloan funding to emerging entrepreneursthrough non‐profit intermediaries. Export Import Bank of the United States (Ex‐Im). Following the credit crisis of 2008,substantial segments of the small business export sector were abandoned by the privatesector. Chief causes could be found in the retreat from trade credit insurance by majorinsurers, the rising operating cost of lending for banks, and the prospects of higher creditlosses. In response, Ex‐Im has created a new program for the small business exporter. Reinsurance. During 2010, Ex‐Imnegotiated a 75 millionreinsurance agreement with amajor insurer who hadincreased the minimum size ofallowable transactions andexited several foreign markets.Ex‐Im is negotiating reinsurancedeals with three additionalinsurers to make sure thatfuture market volatility does notleave U.S small businesseswithout coverage. Planson International (New Gloucester, ME) is awoman‐owned small business that exports Dellcomputers, software, and accessories todeveloping countries under UN, USAID, and NGOcontracts, specifically for aid, humanitarian anddevelopment projects. The company uses a 1.5million working capital guaranteed line of creditwith Bank of America.Planson received a 3 million contract with theUN Development Program and Sudan to supplyequipment for the January 2011 referendum.However, as the exports were destined forSudan, Ex‐Im Bank was prohibited from providingits guarantee for the financing due to sanctionsunder Section 908 of the Trade Sanctions Reformand Export Enhancement Act. Ex‐Im Bank staffworked with the State Department and the WhiteHouse in obtaining a Presidential Waiver, signedby President Obama on November 19, 2010,which permitted the transaction to go forward.Creating a New Small Business LendingFund (SBLF) to Support CommunityBanks Lending to Small Businesses.The President requested a new SmallBusiness Lending Fund that wasenacted in the Small Business Jobs Act.This created a 30 billion initiative thatencourages lending to small businessesby providing low cost capital to qualified community banks with assets of less than 10billion. Through the SBLF, community banks and small businesses can work together to helpcreate jobs and promote economic growth in local communities across the nation. Theprogram provides community banks with an incentive to expand loans to small businesses.The largest incentives will go to banks that do the most to increase their lending—rewarding performance, not promises. Treasury recently began accepting applications, andall SBLF investments will be completed by September 27, 2011. To date, Treasury hasreceived applications from over 250 institutions totaling more than 6 billion in funds8

requested. Treasury expects to complete initial funding under the program in the firstquarter of FY 2012, and will continue thereafter to fund institutions on a rolling basis. State Small Business Credit Initiative (SSBCI). The SSBCI, which was funded with 1.5billion from the Jobs Act, will support lending to small businesses and small manufacturers.SSBCI is expected to help spur at least 15 billion in lending to small

2011, and held for more than five years. 5. Expansionof Limits on Small Business Expensing. The Section 179 deduction enables small businesses to deduct up to 250,000 of the cost of machinery, equipment, vehicles,furniture and other qualifying property placed in service during 2009. The li